The WCM Law Blog

In Quintana v. The New York City Housing Authority, the plaintiff was injured when he slipped and fell while attempting to climb over a mound of snow created along the curb of the sidewalk by NYCHA’s snow plow. The First Department held that, in the absence of evidence that the mound obstructed the crosswalk or was of such magnitude at the corner that it was more reasonable for a pedestrian to cross the street where plaintiff made his attempt, NYCHA could not reasonably have foreseen that a person in the circumstances in which plaintiff found himself would have acted as he did. Moreover, even assuming that an issue of fact exists as to whether the crosswalk was blocked by the mound, plaintiff was not in an “emergency situation,” and had other, albeit less convenient options for crossing the street, including walking back down the block, rather than crossing over the mound outside of the crosswalk.

Thanks to Ed Lomena for his contribution.

For more information, contact Denise Ricci at dricci@wcmlaw.com

Litigation can be slow enough, but, in NJ, it’s likely to get even slower.  There are as many as 60 judicial vacancies in NJ.  This seems unlikely to change in light of NJ’s budget deficits and (potentially) Governor’s Christie’s role as a vice-presidential candidate.  As if there wasn’t enough to worry about in litigation…

For more information about this post, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.

According to a recent Third Circuit decision, asbestos defendants may properly transfer their insurance rights to personal-injury trusts created under § 524(g) of the Bankruptcy Code. In the case of In re: Federal-Mogul Global, Inc., Federal-Mogul, one of the nation’s largest automobile part manufacturers, had previously filed for Chapter 11 bankruptcy in the wake of over 500,000 pending asbestos claims. Pursuant to §524(g) of the Bankruptcy Code, Federal-Mogul incorporated the creation of a personal-injury trust into its reorganization plan. The trust was funded with numerous assets, but most notably included Federal-Mogul’s right to recover under a variety of insurance policies. Although the terms of reorganization contained “insurance neutrality”, a provision allowing insurers to assert any defenses available under the original agreements, it prohibited them from claiming that the rights were improperly transferred. Consequently, Federal-Mogul’s insurers sued, challenging the transfer of rights despite the existence of anti-assignment provisions in their contracts.

Following unfavorable decisions in the bankruptcy and district courts, Federal-Mogul’s insurers appealed to the Third Circuit where a three-judge panel considered whether the anti-assignment provisions were preempted by the provisions of the Bankruptcy Code. In an opinion penned by Judge Anthony Scirica, the Court of Appeals ultimately held that the transfer of insurance rights to the §524(g) trust was permissible because the Bankruptcy Code expressly preempts private contracts that include anti-assignment provisions. Initially, the Court noted that a similar issue had been reached in the case of In re: Combustion Eng’g, Inc., 391 F.3d 190 (3rd Cir. 2004), where the Third Circuit stated that “even if the subject insurance policies purported to prohibit assignment [of] . . . insurance proceeds, these provisions would not prevent the assignment of proceeds to the bankruptcy estate.”

However, the Court moved beyond the holding in Combustion Eng’g to examine the language and construction of § 1123(a)(5)(b) of the Bankruptcy Cole which provides for corporate reorganization by the transferring of property to one or more entities “notwithstanding otherwise applicable non-bankruptcy law.” While the insurers argued that a scarcity of legislative history required narrow preemption, Judge Scirica readily concluded that the “thin and vague legislative history . . . says nearly nothing about the intended preemptive scope of § 1123(a)” and was not enough “to overcome the plain and unambiguous meaning of the words Congress chose.” The Second Circuit then readily applied this preemption to insurance contracts founded on state law, consistent with the Supreme Court’s 1991 decision in Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass’n, 499 U.S. 117.

Finally, the Court of Appeals touched upon certain policy considerations that supported preemption in this context. Specifically, the Court noted that assignment to a personal-injury trust did not impose a greater risk on insurers than they had originally bargained for, and that preemption furthered the Congressional design of § 524(g) by ensuring adequate compensation for asbestos litigants.

http://www.ca3.uscourts.gov/opinarch/092230p.pdf

 Thanks for Adam Gomez, law clerk, for this submission.  If you have any questions or comments, please email Paul at pclark@wcmlaw.com

In Am. Auto. Ins. Co. v. Sec. Income Planners & Co., a federal district court in New York recently held that the American Auto Insurance Company had the duty to defend negligence claims against Security Income Planners & Co., LLC, despite plea allocution by the insured’s president and CFO where he admitted to intentional conduct.

American Auto insured Security Income under a life insurance agents errors and omissions policy, which included a “Commingling, Misappropriation or Conversion” exclusion, as well as an “Improper Personal Profit” exclusion.  After a criminal investigation, the president/CFO admitted he “engaged in a scheme constituting a systematic ongoing course of conduct with the intent to defraud ten or more people by false or fraudulent pretenses, representations or promises, and obtained property from one or more such persons.”  With the assistance of a knowledgeable and clever attorney, several of the defrauded individulas brought an action against Security Income and the the president/CFO for unjust enrichment and misrepresentation, and later amended the complaint to include allegations of negligence, negligent training and supervision, and breach of fiduciary duty. 

American Auto denied coverage to Security Income based on the two policy exclusions noted above.  A coverage battle ensued.  The court rejected American Auto’s position, holding that the two exclusions did not apply to the negligent supervision claim against Security Income.  The court reasoned that negligence and negligent supervision claims arising from fraudulent or intentional acts were not excluded by the policy’s “Comingling, Misappropration or Conversion” and “Improper Personal Profit” exclusions because the claim for negligent supervision did not allege Security Income comingled, misapprpriated, or converted any funds or gained any improper personal profit through its alleged negligent supervision.  

With regard to at least the duty to defend, insurers must realize that the actual facts are largely irrelevant.  The allegations contained in the complaint, if assumed to be true, control the insurer’s duty to defend.  If the principle — and policy forms and exclusions – is worth defending, be prepared for lengthy litigation where a trial may be required to determine whether plaintiff’s allegations are true and the insurer’s duty to indemnify is triggered.

http://web2.westlaw.com/find/default.wl?cite=2012+WL+957528&rs=WLW12.04&vr=2.0&rp=%2ffind%2fdefault.wl&sv=Split&fn=_top&mt=407

Thanks to Joe Fusco for this post.  If you have any questions or comments, please email Paul at pclark@wcmlaw.com